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Firm-Sponsored General Training

  • Felipe Balmaceda

    (Centro de Economia Aplicada, Universidad de Chile)

This article analyzes firm and worker's incentives to invest in general and specific training when these are separable in the production technology and wages are determined by the outside-option principle. It is shown that firms pay for general training, while workers receive the full return on it, and firms and workers share both the costs and benefits of specific training. The case of delayed general training is also studied. When general training is delayed, it is shown that the strategic complementarity between specific and general training increases the worker's incentives to invest in specific training.

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File URL: http://dx.doi.org/10.1086/425435
File Function: main text
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 23 (2005)
Issue (Month): 1 (January)
Pages: 115-134

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Handle: RePEc:ucp:jlabec:v:23:y:2005:i:1:p:115-134
Contact details of provider: Web page: http://www.journals.uchicago.edu/JOLE/

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  1. Daron Acemoglu & Jorn-Steffen Pischke, 1996. "Why Do Firms Train? Theory and Evidence," NBER Working Papers 5605, National Bureau of Economic Research, Inc.
  2. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Scholarly Articles 12375014, Harvard University Department of Economics.
  3. David H. Autor, 2000. "Why Do Temporary Help Firms Provide Free General Skills Training?," NBER Working Papers 7637, National Bureau of Economic Research, Inc.
  4. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
  5. Aaron S. Edlin & Stefan Reichelstein, 1995. "Holdups, Standard Breach Remedies, and Optimal Investment," NBER Working Papers 5007, National Bureau of Economic Research, Inc.
  6. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
  7. Donald B. Hausch & Yeon-Koo Che, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, vol. 89(1), pages 125-147, March.
  8. David de Meza & Ben Lockwood, 1998. "Does Asset Ownership Always Motivate Managers? Outside Options and the Property Rights Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 361-386.
  9. Georg Noeldeke & Klaus Schmidt, 1998. "Sequential Investments and Options to Own," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 633-653, Winter.
  10. Tai-Yeong Chung, 1991. "Incomplete Contracts, Specific Investments, and Risk Sharing," Review of Economic Studies, Oxford University Press, vol. 58(5), pages 1031-1042.
  11. Mark A. Loewenstein & James R. Spletzer, 1997. "Delayed Formal on-the-job Training," ILR Review, Cornell University, ILR School, vol. 51(1), pages 82-99, October.
  12. John Sutton, 1986. "Non-Cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 709-724.
  13. Chang, Chun & Wang, Yijiang, 1996. "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 505-19, July.
  14. Bartel, Ann P, 1995. "Training, Wage Growth, and Job Performance: Evidence from a Company Database," Journal of Labor Economics, University of Chicago Press, vol. 13(3), pages 401-25, July.
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